Larger corporate bank accounts are charged numerous fees for each of the services the bank offers (such as a charge per every check deposited), however the bank rebates these fees based on the companies account balances in a process known as account analysis. If the bank were to fail, the depositor would just be given the bond holdings and then could sell the bonds to get their money back (unless something happens to the bond prices in the interim). In this arrangement, the swept funds on deposit with the bank are secured by some of the bond holdings of the bank. "Repo sweeps" ("repo" meaning " repurchase agreement") are for companies that are concerned about the safety of the bank. Essentially, the funds are just unsecured obligations of the bank, and therefore are paid the highest interest rate offered by the bank to overnight deposit borrowings. The choices for sweep investments are often either money funds, "eurodollar sweeps", or "repo sweeps".Įurodollar sweeps are legal transfers of funds to the bank's offshore entities, although essentially they are just an accounting technique to allow the banks to have full lending of the funds without the reserve requirements normally required and without having to pay for FDIC insurance (as the sweep is uninsured). In this system, the funds are described as being "swept overnight" into an investment vehicle of some kind. In banking, sweep accounts are primarily used as a legal workaround to the prohibition on paying interest on business checking accounts. It has also become part of the arsenal of services offered by credit card companies. Many banks and financial institutions offer a sweep account service for personal customers and small business owners. Sweep accounts are useful in managing a steady cash flow between a cash account used to make scheduled payments, and an investment account where the cash is able to accrue a higher return. JSTOR ( July 2008) ( Learn how and when to remove this template message)Ī sweep account is an account set up at a bank or other financial institution where the funds are automatically managed between a primary cash account and secondary investment accounts.Ī sweep account combines two or more accounts at a bank or a financial institution, moving funds between them in a predetermined manner.Unsourced material may be challenged and removed. Please help improve this article by adding citations to reliable sources.
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